The National Association of Realtors reported on Wednesday that
existing home sales fell 0.8 percent in June, putting the year on
pace for the worst housing sales since the housing bubble
burst. Last month's decline put sales on a seasonally
adjusted annual pace of 4.77 million homes, well below the 6
million pace economists say represents a health housing
market. June marks three straight months of declines in
existing home sales, and through six months, this year's pace is
behind last year's pace of 4.91 million homes sold, which was the
market's worst performance in 13 years. Sales have also
fallen in four of the last five years.

The NAR said that a record number of people who had signed
contracts to purchase homes backed out last month, and first-time
buyers represented a smaller share of the market.
Single-family home sales actually held steady in June, but condo
sales declined 7 percent. Heftier down payment requirements,
tougher mortgage qualifying criteria, and a shortage of suitable
starter homes are keeping many would-be buyers on the fence.
Other, qualified buyers are hesitant to take the leap because they
fear prices will drop even further.

First-time buyers accounted for just 31 percent of sales in
June. These buyers typically account for about half of all
sales. First-time buyers are critical to the housing market
because they are more apt to stay in their homes for many years and
their purchases of low and moderately priced homes allow the
sellers to move up to costlier homes. Another troubling
development is the recently growing trend of buyers backing out at
the last minute. About 16 percent of home sales scheduled to
close last month were canceled, four times the number in May and
the highest number reported since such records have been
kept.

Previously-owned homes are typically sold at a discount compared to
new homes. The median price for new homes in today's market
is about 30 percent higher than that of existing homes, about two
times higher than the normal markup. Foreclosed properties
and short sales, where a lender agrees to let a borrower sell his
home for less than what is owed on the mortgage, accounted for
about 30 percent of all home sales in June. In a healthier
market, this ratio is usually about 10 percent. Making
matters worse, there is a tremendous shadow inventory of
foreclosures waiting in the wings.

Investors have become active again in the housing market, snapping
up foreclosures and other steeply discounted properties.
Investor purchases accounted for about 19 percent of June
sales. Prices, meanwhile, increased in June. The median
price for homes sold increased almost 9 percent from May to June,
to $184,300. This increase, analysts say, was mostly due to
seasonal factors that drove prices higher in the Northeast and
West.